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Theresa Andersson (Sweden/USA)

Intellectual Property Rights / Copy Rights

Monday, August 01, 2011

USA Debt Crisis - A Compromised Deal

I learnt at around 9 pm Sunday that a compromised deal to address the debt crisis in the US has been reached and will be voted on.

Prez Obama did not get all he wanted - the taxation of the rich will be looked at by a super Congress cmttee established to find ways to cut spending. But he will avoid a historical default if the voting proceeds favourably without a major Tea-party revolt on the Republican side.

Let's face it, Republicans will try to entrap the incumbent Prez to talk abt tax increases in the next election. And there are Tea-party-goers who are determined to bring down the Obama administration at any costs. As professional negotiators often point out, it's difficult if not impossible to negotiate on differences in principles and ideologies.

We shall see how far this toxic political environment will continue to hinder the economic recovery of the US and to a lesser extent its trading partner Canada.

8 comments:

Putin says US a 'parasite' on world economy【vanguard】Russian Prime Minister Vladimir Putin on Monday accused the United States of acting as a “parasite” on the world economy by accumulating massive debts that threaten the global financial system.

“The country is living in debt. It is not living within its means, shifting the weight of responsibility on other countries and in a way acting as a parasite,” Putin told a group of pro-Kremlin youth in central Russia.

He also suggested that Washington may have been flirting with the idea of a default in order to weaken the dollar “and create better conditions for exporting their goods.

“But they had enough common sense and responsibility” to avoid a default, Russia’s former president added.

US President Barack Obama on Sunday announced an 11th hour debt deal that will allow the country to avoid its first default in history while pushing ahead with a painful austerity plan designed to slash Washington’s swelling debt.

The deal was met initially with relief on global financial markets and saw Moscow’s two stock exchanges open the day up about two percent but investors then began to have doubts about the plan and gains were reversed sharply.

Putin has repeatedly criticised the United States’ recent foreign exchange policy and its propensity to cover budget deficits with treasury bills and bonds held by sovereign clients such as China and Russia.

The value of that paper will shrink if US debt is downgraded by a major Western ratings agency and Putin was insistent Monday that the world should be seeking new reserve currencies for trade and savings.

“If the US encounters a systemic malfunction, this affects everyone,” Putin told the Seliger camp gathering. “There should be other reserve currencies.”

Putin added that the debt agreement announced by Obama “was not that great overall because it simply delayed the adoption of a more systemic solution.”

Alan Greenspan, Former Chairman of the Federal Reserve: "Very much so. This is not an issue of credit rating, the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default."